Equity Analysis /
Thailand

Home Product Center PCL: After the bitter …comes the sweet

  • Subdued 2Q22 earnings …

  • …will be followed by a much more exciting 2H22

  • Costs and margins look well-managed

Bualuang Securities
20 July 2022

Although HMPRO’s 2Q22 operation may be soft, we like the stock as the leading player in home improvement space and for its opera-tional resilience. It now trades close to its Feb 2020 PER-low (back when COVID-19 first became an issue), so downside risk appears limited. We expect much more exciting earnings for 2H22, which should prompt the market to bid up the stock price. BUY!

Subdued 2Q22 earnings …

Our model points to a 2Q22 net profit of Bt1,501m, up 5% YoY but down 1% QoQ. A YoY recovery in rental income and margin expansion led the expected YoY earnings growth from a relatively low base. We expect that house brands comprised a bigger proportion of the sales mix, pushing up margins YoY. Our 1H22 net profit estimate of Bt3,012m (up 7% YoY) is equal to 49% of our 2022 forecast of Bt6,184m. We assume sales of Bt16,478m, up by 2% YoY and 5% QoQ. Because traffic was lighter in May and June than would normally have been expected, due to early rains, we expect SSS slippage of 1% for Home Pro and 4% for Mega Home. Although Home Pro Malaysia should mark sizzling 2Q22 SSSG exceeding 20%, it comprises only 3% of total sales, so doesn’t contribute materially to HMPRO’s top- or bottom-line.